A Surprising Contender That Might Dominate Grocery E-comm

At that time, about half of those who shopped at Whole Foods said it wouldn’t change how much they shopped there, and that’s still true today.

What has changed is how many people are more likely to shop at Whole Foods; that number has jumped from 19% to 30%. Clearly, Amazon has improved the perception of how it is running Whole Foods, which has fewer detractors than a year ago.

However, Amazon and Whole Foods aren’t yet dominating grocery retail.

I believe Amazon has strong headwinds in becoming a dominant player in the grocery industry. A major factor is its very limited real estate footprint compared to other players.

The vast majority of grocery shopping still happens in stores, and retailers with large store footprints will continue to capture significant traffic.

Texas-based supermarket H.E.B., which has $21 billion in revenue and 340 stores, does about the same business as all grocery e-commerce in the country. In comparison, revenue for Whole Foods, which has almost 160 more stores, was $16 billion in 2017, prior to its financials being incorporated into Amazon’s.

One analogy to consider is that gas stations do more revenue in the United States than all e-commerce combined, grocery or otherwise.

Periodic reminder that Amazon has low single digit percentage share of US retail. Gas stations are a bigger business than all of e-commerce.

But everyone seems to shop online, right? Well, yes, there is some truth to that. Many studies show that most consumers have tried a form of online grocery shopping, looked for grocery info on the web or in apps, and generally showed high interest in this area. Plus, consumers certainly have shown increased comfort shopping online in some non-grocery categories. But when we quantify online grocery spending, it’s low. Some shopping habits die hard, and I think the online grocery shopping experience isn’t yet fully baked enough to change those habits.

So here’s the real impact of what happened when Amazon announced its purchase of Whole Foods in June 2017. Every major grocery retailer got scared to death. They thought Amazon would take on grocery retail in the same way it now dominates books and some other retail segments.

The announcement shocked the industry into getting ready for the coming digital wave in some creative forms.

Though not everyone thinks of it as a place to buy groceries, Walmart’s reaction to the announcement was notable.

Since 2016, Walmart has built up its digital capabilities in San Francisco and New York City, far from its Arkansas headquarters. It has done this through 10 major acquisitions, ranging from Jet.com and Flipkart to Bonobos and Bare Necessities. Seven of the acquisitions on this list came after the Amazon/Whole Foods announcement.

Walmart Store Pickup/Grocery Pickup is its version of “click and collect,” where shoppers place orders online and pick them up at traditional stores. Walmart has built out dedicated pickup lanes at some stores. Just drive up, and an employee loads the bags into your car. It is also experimenting with automated pickup kiosks that sit in their parking lots.

I think this is a winning concept in that it bridges the digital experience and the realities of life. Delivery can sometimes be challenging, especially if you are waiting for perishables and unsure exactly when they will arrive.

I live in a dense part of the Northeast, where Walmart doesn’t have a presence as sizable as in the middle of the country. People in my area sometimes forget how easy it can be to pull off the highway into a big-box store’s parking lot. If you have small kids, like I do, it can be a real challenge to pull off a big shopping trip. But having someone just drop groceries in the back of your SUV sounds amazing.

And that’s the point. E-commerce is young. To date, it has largely been fulfilled via delivery to consumers’ homes. Some emerging forms of e-commerce might end up being more suitable for groceries in areas where Amazon and Whole Foods are not best positioned to take over the world.